The Karnataka shot in the arm for Modi

Whichever political party or coalition ultimately forms the government in Karnataka, there is no denying the BJP has turned in a tremendous performance. It is evidence the party remains popular, as does prime minister Narendra Modi.

The loss of livelihoods due to the GST and the lack of enough employment opportunities could be important issues in 2019. (PTI)

Whichever political party or coalition ultimately forms the government in Karnataka, there is no denying the BJP has turned in a tremendous performance. It is evidence the party remains popular, as does prime minister Narendra Modi. While some element of anti-incumbency cannot be ruled out, the BJP and Modi must be congratulated for cracking the caste code, the key factor in the elections. Indeed, the lack of jobs, problems relating to GST and even farm distress were altogether eclipsed by caste issues in Karnataka.

In Gujarat, for instance, the BJP did face some trouble from irate textile traders who made it clear they were unhappy with GST. To be sure, Karnataka, thanks to its Silicon Valley-like ecosystem, is among the country’s more prosperous states; per capita net state domestic product (at current prices) almost doubled to `1.74 lakh, between 2011-12 and 2017-18, an achievement not matched by too many others. The IT, e-commerce and the start-ups ecosystems, it would appear, are creating enough employment opportunities in Bengaluru and it is possible there is some spillover effect to other parts of the state.

However, jobs and prosperity are typically factors in Parliamentary elections—the BJP came to power on the promise of acche din and sab ka saath, sab ka vikas. The loss of livelihoods due to the GST and the lack of enough employment opportunities could be important issues in 2019. Labour bureau data shows around 12 lakh jobs were created between FY15 and FY18 and while these numbers appear very unrealistic given the massive road construction and other infrastructure projects taken up, it is true that not enough employment has been generated to meet demand.

It is equally true the economy hasn’t grown rapidly enough in the past three years even though the global economy has picked momentum. With exports falling sharply in FY16 and FY17 to sub-$280 billion levels, India hasn’t managed to grow its share of global trade. As economists have pointed out, labour-intensive segments, such as textiles, have fared particularly poorly. Labour reforms, which the NDA seemed keen to roll out initially, and which may have encouraged companies to hire more people, have been put in cold storage. Given it has not been able to generate enough jobs, the NDA is probably unwilling to upset those already employed. In similar fashion, it is writing off farm loans to placate farmers as it has not been able to usher in meaningful farm reforms.

In Karnataka, too, the BJP has promised a farm loan waiver as it did in Uttar Pradesh; the total waivers across states have crossed Rs 1 lakh crore. Since farmers are a big constituency, and small and marginal farmers are in distress, additional waivers in Madhya Pradesh and Rajasthan, where elections are due towards the end of the year, are also likely; loan waivers of around Rs 58,000 crore worked very well for the Congress in 2009.

There is little doubt loan waivers don’t tackle rural stress, but in the year that is available, apart from roads and infrastructure that result in quick job creation, chances are Modi will sharpen his focus on improving various insurance schemes—13.4 crore low-cost accident insurance and 5.3 crore life insurance policies have been sold so far—on the 30+ crore Jan Dhan accounts, the Rs 2.9 lakh crore transferred to the poor via DBT, 3.5 crore new LPG connections in rural India, higher MSPs and Modicare for 10 crore families. Whether this wins Modi the elections in 2019 remains to be seen, but unless accompanied by such measures, just focusing on economic reforms may not have either given how long jobs creation usually takes.